The Shariah Advisory Council (SAC) of Bank Negara Malaysia at its 214^th meeting on 30 June 2021 has ruled that Islamic financial institutions (IFIs) are not allowed to include and account for any accrued profit from the original financing in the new principal amount of R&R financing. This is because such practice will amplify the amount of profit on debts (compounding profit). Therefore, IFIs shall ensure that in executing R&R financing:

1. the new principal amount of the R&R financing shall be equivalent to the outstanding principal amount of the original facility, if there is no additional financing involved;
2. the amount of accrued profit and late payment charges (where applicable) from the original financing can be added to the total new debt obligation, but this amount cannot be capitalised in the calculation of the new profit; and
3. the prohibition is applicable to R&R financing with all customers (both musir and mu’sir).

Please refer to the attachment for more information